The following correction was printed in the Guardian's Corrections and clarifications column, Tuesday November 20 2007 In the article below we listed Picador authors whose new books we said would be published from the start in paperback. Picador has yet to decide which authors will use the new publishing strategy. The list was of authors whose novels might no longer be published first in hardback. This has been corrected.

With its creamy paper and embossed fabric covers, the hardback has always been the elite format for literary fiction.

Now Picador, an imprint of Pan MacMillan, the 8th largest publisher in the UK, which has authors such as Helen Fielding, Don DeLillo and Cormac McCarthy on its books, has called time on what it describes as "a moribund market". From next year it will launch almost every new novel as a £7.99 paperback, with other large publishers expected to follow.

The decision to scrap the system of selling a hardback a year before releasing the paperback has created waves in the publishing world, and is seen by some as the beginning of the end of the format in literary fiction.

Since 2001, booksellers have doubled the discounts offered on hardback novels and some have sold fewer than 100 copies. Even Graham Swift, the Booker prize-winning author of Last Orders, has sold fewer than 4,000 copies of Tomorrow, his latest novel, since its debut in April.

From spring, Picador will use paperbacks to launch new books from all of its literary fiction writers, unless they have a guaranteed profitable hardback market. It estimates that 80% of its literary fiction will be published in this way.

Rival publishers described it as "a seismic change".

"Hardback then paperback has been the model for 60 years," said Dan Franklin, the veteran publisher at Jonathan Cape. "I would be worried about the call to Cormac McCarthy to tell him he's going straight into mass-market paperback. I think he'd say no thanks."

McCarthy might argue his hardbacks make money. Since it was published last November, The Road has sold almost 1,000 copies a month in Britain, earning £156,221.

Kirsty Dunseath, publishing director of Weidenfield & Nicholson, said the move could lessen the prestige of the novels. "Coming out in hardback is a statement of confidence in a novel and gets the reviews," she said. "It doesn't say much for your confidence coming out in paperback. Anyway, £12.99 isn't such a high price to pay - you'd happily pay that for a CD."

But Andrew Kidd, the publisher at Picador, is convinced the hardback's primacy is over. "Over the last few years publishers have witnessed sales of literary fiction in hardback reaching new lows," he said. "All of us find that depressing, and there are, frankly, no reasons to think the situation might soon reverse itself."

Kidd will test his new system with Sputnik Caledonia, by Andrew Crumey, about a fantasy space mission by Scotland's first cosmonaut. His previous effort, Mobius Dick, sold just 1,846 copies in hardback, earning Picador less than £28,000, before making back the advance and more in paperback.

"I was apprehensive when I first heard," he said. "A hardback has prestige and everyone likes to have that on their shelf. But I'm pleased now that my friends will be able to afford to buy it rather than waiting a year."

Richard and Judy's Book Club on Channel 4 has been credited with hastening the end for the hardback by insisting a new book is out in paperback before it is added to its influential list. Libraries, which used to in effect underwrite the hardback market by guaranteeing to buy almost every new literary novel, have diverted resources to music, computers and DVDs.

The industry says publishers are now spending more money on securing TV, magazine and newspaper coverage around the publication of paperbacks, and losing money on discounts. The typical hardback literary or general fiction book is now discounted by almost a third and costs £10.59 today, compared with £12.14 in 2001, according to Neilsen Bookscan, the sales research firm.

Picador is not entirely abandoning its small readership who like hardbacks, and will publish a limited edition hardback for around £20. It will be aimed at collectors and will sport printed covers, a bookmark ribbon, fabric "head and tail" bands and heavyweight paper.

"Its like Radiohead offering their new album both as a pay-what-you-like download and a deluxe £40 boxed set, including old-fashioned vinyl LPs," said Kidd. "Until now we have simply not given people what they want. Again and again readers have told us that they have liked the sound of one of our books after reading a review, but won't be buying it because it is in hardback. We were shooting ourselves in the foot. I am quite sure other publishers will follow us and I know of one major publisher that is planning it."

The Friday Project, which specialises in converting internet blogs into books, has already announced plans to publish paperback versions just two months after the hardback. It is also limiting hardback runs to 1,000 and each will be signed and numbered.

"It is not uncommon for a literary fiction hardback to sell under 100 copies," said Scott Pack, commercial director. "The vast majority of literary fiction is only published in hardback because otherwise the reviewers won't review it. It's mad. They should be reviewing on the basis of content rather than the binding."

Other parts of the hardback market remain in rude health. Eats, Shoots and Leaves, the book about grammar by Lynne Truss, sold 23,377 copies in hardback. Wilbur Smith's latest novel, The Quest, went on sale in April and has taken £2m, despite its £18.99 price tag.

The secret to this success is simple said Joel Rickett, deputy editor of the Bookseller: "Smith delivers to a formula and his fans are desperate to read his next book, so it sells."

Paperback writers

Among Picador's list of authors whose novels might no longer be published first in hardback: